Rosen Report Answers, 2013
/Every year, I participate in the Rosen Report in which I (along with an impressive panel of fellow dealers) answer a series of timely and interesting questions which pertain to the rare coin market. This year's version of the report was interesting and I think that you will find my answers to be informative. Please note that all of the questions are as asked by Maurice Rosen; the answers are the exact ones which I gave to him. These answers were published in December 2012 and January 2013. Out of respect for the "freshness" of Mr. Rosen's newsletter, I waited a while to publish them.
1) Much has been said and written about the glut of off-grade and problem slabbed coins (due to sloppy grading, doctoring, and just very low-end coins for the grade). The comparison of those coins in the market versus truly high-quality, eye-appealing coins --the ones we constantly look to buy-- is striking.
A) Will we always have this glut?
I’m guessing that in the 1880’s, the collectors of that era were complaining that there were a lot of not-very-nice coins around so this “complaint” is not new. Also, you have to realize that grading is a continuum. MS63 is actually a series of grades, ranging from 63.0 to 63.9. You never see the 63.7, 63.8 and 63.9 coins because they are being tried and re-tried for higher grades and the 63.5 and 63.6 coins are being sold by retailers like myself, Legend and Pinnacle to our best clients and don’t get offered to the average collector. So what most collectors see is the “dreck”—i.e., the 63.2 and 63.3 coins that just barely made it. It’s no great conspiracy and not at the fault of the services; it’s more the dynamics of the marketplace.
B) What would reduce or even eliminate it? And, what needs to be done to achieve that?
You will never reduce grading mistakes by the services. The coins are being graded by humans and even the best grader gets a few things wrong every day. Multiple this by three graders, all making a few mistakes every day, and at the end of a decade or two of grading you have a few thousand egregious errors. A few things the services can do is 1) be more proactive about cleaning up their mistakes 2) use more outside consultants for esoteric coins that they don’t really understand 3) rotate the graders more frequently 4) shame the blatant doctors of coins by outing them.
C) Isn't it true that there's always been a glut of inferior slabbed coins but it is due to our heightened awareness to grading and improved tastes that the situation is magnified?
I disagree with this. I think the number of dealers and collectors who really, truly know how to grade (like at the level of a Jason Carter or a Ryan Carroll) is always going to be very few, just like only a few athletes are ever going to be able to run like Usain Bolt or hit like Miguel Cabrera. The seeming “glut” of crappy coins is mostly because so few nice, fresh coins are available and the 10-15% of coins in any series that are “A” quality are so amazingly easy to sell right now, most collectors (and many dealers) never see them. Remember: even before third-party grading there were still a lot of schlocky coins in the market.
2) Is it time to recognize Modern Coins as a more legitimate part of numismatics, therefore worthy of an investor's consideration? Or, do you regard those coins as largely a hustle of sorts, too speculative and over-exploited? And, whether you like Moderns or not, are there any you see that are worth investing in?
I’m not a big fan of modern coins but I totally understand why people collect them and can understand their appeal, such as it is. I don’t think that modern coins in PR70 or MS70 are worth such big premiums but, then again, I think common date Walkers in MS68 or PR68 are bad deals as well.
If I had to select an area in the modern coin market to invest in, it would be the Spouse coins. Some of these have very low mintages and if the market for these were created and nurtured by a legitimate modern coin dealership, I think they could see good long-term growth. My main caveats in modern coins are don’t overspend for quality and stay with low mintage issues.
3) A) Of all worthy slabbable coins (pre-Moderns of sufficient economic value to be submitted) what percentage would you say have been slabbed? Indeed, have the services pretty much penetrated the universe of those coins?
Not including Morgan Dollars and Saints (which still seem to exist in significant quantities as raw coins), I would say that over 75% of all the worthy coins have been slabbed. In the case of areas such as early gold or Proof gold, the percentage of slab-worthy coins that have been graded at least once by the services may be as high as 90%
B) If so, what are the implications here?
I can think of at least two major implications here. The first is that if NGC and PCGS clean up their population figures reasonably well, we can, for the first time, have a pretty good idea of the absolute rarity for many issues. The second implication is that really “fresh” coins (and by this I mean stuff that has never been to the services) are probably even rarer than we think they are. The next time a really great really fresh deal (like the remainder of the Bass collection or Eric Newman’s coins) come on the market, you will see a level of demand for cons like this unseen in numismatic history.
4) What one series of reasonably moderate cost to complete (say, under $25,000) would you recommend an investor look into? Please explain your selection.
$25,000 is a pretty limiting amount for working on a set but if this is all that I have to work with, I’m going with Proof 64 Barber Dimes. Let’s see…there are 24 different dates and at an average cost of around $750-1000 per coin (and no key dates with big premiums. That means a set of reasonably scarce coins with good eye appeal could be done well within budget. I would focus on nicely toned coins with cameo designation that were just a hairline or two away from grading higher. And at just a few hundred bucks more for 65’s, you could throw a few Gems into the set.
5) The premiums for generic U.S. gold coins are coming back slightly from their lows of a year ago. A) Have the dynamics of this market changed so much that it is wishful thinking to expect premiums to expand much more? Why so?
In the past, there were a number of large marketers who sold generic gold. Now they sell modern coins. The supply of generics has stayed constant but there is a pronounced lack of demand. It’s understandable why the marketers have punted generics from their programs. Other than Saints, most generics just don’t have a really compelling story. Modern coins can be sold in MS69/PR69 and MS70/PR70 grades, they have reasonably attractive designs and they have performed fairly well over the course of the last decade.
B) If you think premiums can increase a lot, please explain why and what conditions would arise to bring that about. Also, please state which issues here offer the best investment potential.
Unless the large marketers decide to re-focus on generics, I don’t see this market doing that well. This was always a very heavily manipulated market with periodic “shortages” created by the suppliers and market conditions generated by promotions. If a firm suddenly starts a promotion on, say Indian Head half eagles in MS64 and they need 500 coins, you’ll see prices shoot up. But the way the market is now, there is no real reason for most generics to increase in value. I don’t really care for the “investment potential” of generics but I do buy MS66 Saints for my personal holdings as I like the supply/demand ratio of these coins.
6) There's talk about the government phasing out the use of coins and paper money as technology provides digital and other forms of payment.
A) How would such a development effect the coin market?
My first reaction was if coins and paper money are phased out, this will add a flavor of “uniqueness” to our markets as we are suddenly dealing in obsolete products. But as I thought more about this, I thinking phasing out coins and paper money would harm the market(s). Even though no one searches their change for interesting coins anymore like we did as kids, getting a new generation of collectors interested in coins will be a lot harder if they don’t even know what a “coin” or a “bill” is.
B) Would it open the door to certain oppressive government actions bearing down on the coin market?
I think any of the (potential) oppressive government actions on coins in the future are going to be based on VAT’s or comprehensive interstate internet taxation.
7) Some folks have the feeling that the U.S. coin market has been so researched and exploited that every stone has been overturned and there are few, if any, areas left with standout potential.
A) What are your thoughts here?
If you think about it, the majority of the research on US coins has been focused on a few areas. There are plenty of series that have next to no research. And even areas that have specialized books about them often lack good general information. An example: if you collect bust half dollars, the Overton book is great. But it is solely about die varieties. What if you want basic information about, say, an 1812 half dollar and don’t care about die varieties. No one has ever written a good general collector’s guide to Bust Halves that discusses the rarity of the coins (date by date), how they should look, which coins are the finest known for each year, how to tell Proofs from business strikes, etc.
B) What area or areas seem relatively unexploited to you?
A few areas that come to mind are Proof bust silver coins (someone should write a book on these…), San Francisco Liberty Head gold (especially quarter eagles, half eagles and eagles), Philadelphia gold and early gold.
C) Any favorite issues there?
Just about any 100% no-questions-asked Proof bust silver or gold coin is a great value. Same goes for many pre-1878 San Francisco quarter eagles and half eagles in EF45 and better with original color and surfaces.
8) The commem market (silver and gold) has been in the doghouse since the wild highs of 1989.
A) What will it take to revive it?
Commemoratives aren’t marketed properly. Sellers always describe coins with comments about how cheap they are relative to 1989. Who cares! That’s not a smart approach. They need to be marketed for their beauty, their relative scarcity and their collectability, not because they are thirty cents on the dollar when compared to 1989. If a large firm like Blanchard suddenly got interested in commems, the coins could increase in value. Perhaps a really good new how-to-collect book might help this series as well.
B) What specific issues have noteworthy potential?
I’ve always been fond of the issues from the 1910’s and 1920’s in MS65 and MS66. I also like coins with really nice color but not enough of a “wild” appearance that they bring huge premiums.
9) Are Morgan and Peace $1s still a great choice for investment gains? Which issues do you like best.
Scarcer date O mint dollars in MS65. For Peace Dollars, I like nearly any non-Philadelphia issue in MS65 with original surfaces.
10) CAC coins: A) Is the market warming more and more to CAC'd coins such that investors should focus almost exclusively on them?
In my opinion, CAC has made extremely strong inroads into the high end of the coin market. If you look at auction results for CAC, they inevitably bring higher prices. When I have a CAC and non-CAC example of the same issue on my website, the CAC coin inevitably sells first. I don’t agree with the thought that a non-CAC coin is a “bad” coin but I feel that people who are buying coins primarily as an investment are probably better off focusing on CAC material, especially if they are not comfortable with their ability to distinguish an A coin from a B coin.
B) In what areas do CAC'd coins have the greatest impact?
The areas that CAC has made the greatest impact are the areas which the grading services are most inconsistent on: common date St. Gaudens double eagles in MS66 and MS67, better date 20th century gold issues in MS65, Proof gold, high end early gold.
C) The least impact?
Collector coins such as colonials, early copper, rare date bust and seated, EF-AU early gold, certain areas of the rare date gold market.
11) Since 2001, gold has risen 7-fold from the 250's to as high as the 1900's. During these last 12 years the government has largely not changed the climate or rules under which transactions take place, nor taxes on or ownership of gold. Something tells me that the next multi-fold increase in gold's price will see the government taking a much more aggressive and oppressive role in the market. A) What are your thoughts here?
As state and federal deficits increase, the government is going to have to get more create about producing revenue without raising taxes. I would imagine that large profit-taking in gold, should metal prices rise to, say, $3,000 per ounce, would put these gains on the radar for the government.
B) How might the rare coin market behave with such heightened presence of the government in the gold market?
For many collectors, one of the beauties about the coin market is that it remains essentially unregulated. Regulating it certainly won’t be a way to attract more people into the hobby.
12) What's the one coin that could come onto the market that would cause the biggest splash in and out of the industry? Why so? (Examples: 1873S Seated $1, 1849 $20).
The currently missing third known example of the 1854-S half eagle would be a pretty big deal for me or the second 1870-S three dollar that was supposedly placed in the mint cornerstone. But I think the coin that would actually cause the biggest splash would be an 1849 $20 that someone could own. That coin would bring a lot of money!!
13) You have $1 million in fun money. What one coin or series would you buy to hold for the next ten years? Please explain your selection.
Ah, the old million dollar fun money scenario… My answer would be predicated on what was available for sale at the time this money became available. If, for example, a fresh deal of early gold became available and I could spend the million dollars at an auction (and provide my client with fair value), I’d go in that direction. Or, if there was a great collection of Saints, I’d focus there. The main thing is that I would be looking for outstanding quality coins with great eye appeal and true overall rarity.
14) Are generics dead? Are there any issues here that offer good value, if not speculative appeal for someone looking to amass a position?
Generics aren’t necessarily dead but if you invest in them, you better have a way to market them or access to information about who is planning a big promotion. As an example, if a little birdy tells you that a TV shopping network is planning on promoting MS64 Morgans in a big way, then it might make sense to invest in these coins before prices go up. But that seems highly unrealistic for most collectors—even those with good connections
15) Two investors come to you to assemble a portfolio to hold for the next 5 to 10 years. One has $25,000 to commit, the other $250,000. What would you put into each of their portfolios? Why make those picks?
a) $25,000 portfolio: one each of the following: Reduced Size Capped Bust Dime (1828-1837) in MS65 with CAC approval (around $10,000), No Motto Seated half Dollar in MS65 with CAC approval (around $7,500), Indian Head half eagle in MS65 with CAC approval (around $12,500). Yes, I realize that adds up to $30,000…
b) $250,000 portfolio: one each of the following, most or all with CAC approval: a nice MS65 Red and Brown Matron Head Large cent from the 1820’s or 1830’s, no 1820 (around $10,000), an MS64 Large Size Bust Quarter 1815-1828 (around $15,000), a true Gem MS65 Capped Bust Half Dollar 1807-1836 (around $10,000), an MS64+ No Motto Seated Liberty Silver Dollar, 1840-1865, (around $10,000). That would be a total of around 50k on a group of nice type coins. Combined with the 30k portfolio above, this would be around 80k on type coins
Three Dollar Gold Piece, 1854-1889, an MS66 example (around $20,000), MS64 Classic Head Half Eagle, 1834-1838 ( around $20,000), No Motto Liberty Head half eagle, 1840-1865 in MS64 (around $15,000), a nice piece of Proof gold in PR64 or PR65 struck before 1900 and withy a mintage of less than 100 (around $35,000) and one really nice MS62 to MS63 Dahlonega quarter eagle or half eagle (around $20,000) That would be a total of around $110k+ on nice gold coins.
One great $50,000 coin, preferably in gold. Maybe something like a finest known Liberty Head eagle or a rare date Saint (has to be CAC approved) or an important Type One or CC Liberty Head double eagle.
The remaining 10k on hand selected MS65 Saints, all CAC approved.
Do you have any comments or further questions about my Rosen Report 2013 answers? If so, please contact me via email at dwn@ont.com
